Note: In 2010, the Federal Housing Finance Agency (FHFA), which has authority over mortgage underwriters Fannie Mae and Freddie Mac, directed these enterprises against purchasing mortgages of homes with a PACE lien due to its senior status above a mortgage. Most residential PACE activity subsided following this directive; however, some residential PACE programs are now operating with loan loss reserve funds, appropriate disclosures, or other protections meant to address FHFA's concerns. Commercial PACE programs were not directly affected by FHFA’s actions, as Fannie Mae and Freddie Mac do not underwrite commercial mortgages. Visit PACENow for more information about PACE financing and a comprehensive list of all PACE programs across the country.

Property-Assessed Clean Energy (PACE) financing effectively allows property owners to borrow money to pay for energy improvements. The amount borrowed is typically repaid via a special assessment on the property over a period of years. Colorado has authorized local governments to establish such programs, as described below. (Not all local governments in Colorado offer PACE financing; contact your local government to find out if it has established a PACE financing program.)

Colorado authorized local governments to establish a PACE program in May 2008 through amending counties' and cities' existing authority to create improvement districts (H.B. 1350). The law allowed a city or county board to propose an improvement district specifically for clean energy improvements via resolution or ordinance. In 2010, it was expanded to allow multiple counties, even non-contiguous counties, to form a single improvement district (S.B. 100). PACE was further expanded in 2010 (and subsequently amended in 2013) by the creation of an improvement district encompassing the entire state that had authorization to issue up to $800 million in PACE bonds (H.B. 1328 and S.B. 212).

Cities and counties wishing to provide PACE financing programs to their citizens may, by resolution, opt to join the statewide energy improvement district and tap the bond revenue raised by the improvement district. Both energy efficiency and renewable energy technologies are PACE-eligible and among the technologies from which a local government may choose include in its program. Boulder County was the first county in Colorado to implement a program using a PACE financing mechanism (see the Boulder County ClimateSmart Loan Program).

Local governments are also authorized to issue bonds to fund the PACE programs if voter approval is first attained. The board of the county (or city and county) can provide financing assistance to approved applicants who are constructing, expanding, or upgrading an eligible clean energy project by issuing tax-exempt private activity bonds for a minimum amount of $500,000 for a geothermal energy project and $1,000,000 for any other type of eligible clean energy project. The repayment term is a maximum of 15 years for geothermal projects and 10 years for any other type of eligible clean energy project. Geothermal projects are unique in that the repayment term can be correlated to the revenue stream associated with the project being financed by the bonds, subject to a maximum payment in a fiscal year of 75% of estimated project revenues in the fiscal year (see H.B. 1222).